JUDGMENT DATE: 19/07/2017
BENCH:
- Mr. Devender Kumar Sikri - Chairperson
- Mr. S. L. Bunker - Member
- Mr. Sudhir Mital - Member
- Mr. Augustine Peter - Member
- Mr. U. C. Nahta - Member
- Mr. Justice G. P. Mittal - Member
LEGAL PROVISION - Sec 3 & 4 of the Competition Act, 2002
FACTS :
In a recent case between Fast Track v. Ola, the Competition Commission of India (CCI) prima - facie opined that the radio taxi service Ola cabs had abused its dominant position within the meaning of Sec 4 of the Competition Act, 2002 (hereinafter referred as the Act). Accordingly, the CCI has directed the Director General (DG) to cause an investigation and to submit his report within 60 days.
Fast Track contended that, Ola occupies a dominant position in the market of radio taxi services in the city of Bengaluru and they have abused their dominant position by engaging in predatory pricing.It was contended that the Opposite Party, under the brand name Ola cabs, is offering various unrealistic discounts and rates to lure the customers and unviable incentives to its drivers thereby resulting in business loss for the Informant. According to Fast Track, Ola spends more money on discounts and incentives (apart from the variable costs it may be incurring) on customers and drivers as opposed to revenue earned by them. According to Fast Track, Ola spends around Rs. 574 per trip while earning average revenue of Rs. 344 leading to a direct loss of Rs. 230 per trip. It was also alleged that such conduct is resulting in ousting the existing players out of the market and is also creating entry barrier for the potential players.
ARGUMENTS :
Fast Track had claimed that it had suffered irreparable loss due to Ola’s aggressive pricing in the market. The majority of CCI members held:
“The existence of the second element, i.e., irreparable loss to the Informant or definite apprehension of adverse effect on competition in the market has also not been satisfied in the instant case. The Informant has contended that its active pool of 600 taxis in March, 2014, came down to a mere 250 taxis in March, 2015,because of the anti-competitive strategy of the Opposite Party.”
The Opposite Party, however, argued that out of 350 taxis which moved out of the Informant’s network, only around 120 taxis came on the network of the Opposite Party.Furthermore, the Informant has stated in the interim relief application that monthly revenue of the Informant in Bengaluru market has eroded from Rs. 23lakh in March 2014 to about Rs. 9.5 lakh by December 2014 leading to significant losses. The Opposite Party has contested these losses stating that in the absence of further evidence from the Informant, it is extremely difficult to conclude whether the said losses are attributable to the conduct of the Opposite Party or due to the inefficiency of the Informant
ORDER:
Competition Commission of India made very wise decisions and ordered the following:-
- With immediate effect the Opposite Party shall organize its pricing system in the relevant market in such a way that the incentives paid by the Opposite Party to the cab operators/drivers together with the share of the passenger revenue passed on to the cab operators and other variable costs do not exceed the passenger revenue collected by it. This order does not imply determination of the price at which the Opposite Party may provide its services in the relevant market.
- The Opposite Party shall notify the Commission about the details of its pricing schemes in the market for „radio taxi services in the city of Bengaluru‟ as on 17-02-2015, when the Informant brought the information to the Commission, within ten days of this Order.
- The Director General shall complete investigation of the case within 60 days from the date of this order and submit its report to the Commission.
- This order shall be applicable only until the final decision is taken by the Commission relating to the alleged abuse of dominance by the Opposite Party.
- Secretary is directed to convey this decision to the Parties and to the Director-General for compliance.
